capital expenditure

Capital Expenditure

Payments made in cash or cash equivalents over a period of more than one year. Capital expenditures are used to acquire assets or improve the useful life of existing assets. An example of a capital expenditure is the funding to construct a factory. In accounting, capital expenditures must be capitalized; that is, the expenditure is recognized on a balance sheet gradually over the course of an asset's useful life. Capital expenditures are recorded as liabilities on a balance sheet. They are also called capital outlays. See also: Capital asset.

capital expenditure

Funds used to acquire a long-term asset. A capital expenditure results in depreciation deductions over the life of the acquired asset. Also called capital outlay.

capital expenditure

capital expenditure

Money spent on capital improvements,being those that change the nature of property, extend its useful life, or otherwise improve it beyond the natural improvement to be expected with routine repairs and maintenance.This is an important concept because capital expenditures must be added to the basis and depreciated slowly over time,while noncapital expenditures for repairs may be deducted entirely in the current year on one's taxes.

Capital Expenditure

An expenditure made for an asset with a useful life of more than one year that increases the value of or extends the useful life of the asset. Capital expenditures generally may not be deducted in the year they are paid, even if they are paid in connection with a trade or business. In other words, they are capitalized and generally may be depreciated or amortized.

Doug Belanger, President, stated, "We are pleased that the new capital cost estimate reflects a less than 16 percent increase while the industry as a whole has experienced capital cost increases of approximately 20 to 25 percent over the last 18 months.

The distinction between deductible repairs and capital costs is based on the purpose of the expenditures: the purpose of a repair is to restore property back to an efficient operating condition, while the purpose of capital expenditures is to extend the property's life, increase its value or make it adaptable to a new use.

Since capital costs for wind power projects are very high, front-end capital costs because of environmental assessments, approvals, building foundations, erecting of towers and turbines, and connecting transmission lines, projects cannot be financed on the basis of the Ontario's fluctuating electricity spot market, Boileau says.

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